A landmark decision handed down last month by the full Federal Court has placed the spotlight on casual employment arrangements, calling into question whether many “casuals” are truly casual.
The decision has broad implications for businesses that largely engage a casual workforce, increasing the likelihood of significant back-payment claims for entitlements that what would otherwise be reserved for permanent employees.
Below we outline some of the key considerations in the case and offer practical tips for businesses to reduce laibilty.
In WorkPac v Skene (WorkPac) the Court found that Paul Skene was not a casual, despite being categorised as one on commencement of employment, in accordance with the WorkPac Agreement.
Following a claim for unpaid annual leave on termination, Skene was subsequently awarded $21,000 in unpaid annual leave plus $6700 in interest.
Skene was employed with the status of ‘casual field team member’ under the WorkPac Agreement. The WorkPac Agreement provided a casual loading of 20 per cent “in lieu of leave entitlements (with the exception of long service leave)”. The Agreement also made clear that any flat rates of pay for casuals included the casual loading, and no additional monies would be payable.
Skene’s letter of engagement stated he was casual and provided for a flat hourly rate of pay with no specification of a separate casual loading. He was paid weekly by WorkPac for each hour worked, with his main employment period being between 20 July 2010 and 24 April 2012 at Rio Tinto’s Clermont mine. He was regularly rostered to work seven days on, seven days off for 12.5 hour shifts under a fly-in fly-out arrangement. At the beginning of 2011 and 2012 he was given his roster for the ensuing year (12 months in advance).
Skene had taken two short periods of unpaid absences in 2011 which were negotiated with the mine. Other than these periods, there was no break in employment.
On termination Skene was not paid for untaken accrued annual leave.
Although initially Skene was not allocated permanent accommodation when working on-site at the mine, he was later allocated permanent accommodation which he returned to for each swing and left his belongings at during his off weeks.
In the decision, the Court confirmed that various factors must be considered when assessing whether an employee is engaged as a casual. Simply calling an employee a casual will not be sufficient, as the “essence of casualness” includes the lack of ongoing work, as well as an unpredictable, irregular, intermittent and short-term patterns of work. These and other indicators, such as short notice periods and casual loading, must be considered together for the purposes of the Fair Work Act 2009 (the Act) and workplace agreements.
In this particular case, the employee was engaged to work on a regular FIFO roster given to him 12 months in advance, provided with accommodation where he was able to leave his personal items, paid an “all up” or flat rate (i.e. inclusive of the casual loading), and had one hours’ notice of termination as per his contract of employment.
The Court clarified that while a contract of employment may demonstrate an intent to engage someone as a casual, it is necessary to objectively assess whether that intention has actually been put into practice and maintained, or if the employment relationship has changed over time.
The Court confirmed that the employee was “not a casual employee” for both the purposes of the National Employment Standards (NES) contained in the Act and the WorkPac Agreement, providing the employee with the necessary entitlements under both. The Court also ordered fines to be paid by WorkPac Pty Ltd, as while it unknowingly contravened the Act, the Court stated that “its ignorance was not an excuse”.
WorkPac has since announced it has no intention to appeal the decision.
This current decision means that certain casual employees may be entitled to back-payment for accrued entitlements (such as annual leave, personal leave and severance etc).
Employers are recommended to hold off taking any immediate action but may wish to set some money aside in the meantime and seek advice.
The above case demonstrates the complexities that arise out of the long term engagement of casuals on a regular and systematic basis. It is recommended employers consider the following:
- Avoid using flat rates of pay for casual employees and ensure the casual loading is clearly separated out on pay slips and in contracts of employment
- Ensure contracts of employment are appropriately drafted to make clear which full-time/part-time entitlements the casual loading is payable in lieu of
- Review whether existing casual employees have no ongoing expectation of work and are working irregular, intermittent and unpredictable patterns of work
- Provide short-term rosters, no more than two weeks in advance
- Where casual employees are working regularly and systematically, offer them the opportunity to convert to permanent employment in accordance with the relevant award, enterprise agreement or after no more than 12 months if the employee is award/agreement free; and
- Properly document instances where employees elect to stay on casual employment where the opportunity to convert to permanency was offered.
► For more information on this case or for advice on strategies to manage a casualised workforce, contact CCI’s CCI’s Employee Relations Advice on (08) 9365 7660 or [email protected].